Home ownership can make great financial sense. Over the long term, residential real estate has been a very strong asset – showing excellent appreciation. Renters who add up what they've shelled out during their renting years are often shocked to see how much mortgage help they've given their landlord. Most would prefer to have that money build their own home equity.
If you're dreaming of a home of your own, then there's good news. Getting into today's housing marketing isn't out of the question if you do some good common-sense planning.
RUN THE NUMBERS: First, determine what you can afford.
It happens: you fall in love with a home that seems perfect, but it is way outside your possible price range. Before you go looking at homes - and long before you consider putting an offer on one – you need to run the numbers. Get some professional guidance – there’s more to home ownership than a mortgage payment – and determine exactly what you can comfortably afford.
Meet with us first. Independent mortgage brokers are expert at providing the advice, education and resources that first-time buyers need. We can offer advice on boosting your credit rating, determining an affordable mortgage payment, and advising you on the extra costs that come with buying a home. Generally, you can expect to pay between 1.5% and 4% of the home’s selling price in total closing costs.
We can also make sure you have a pre-approval with an attractive rate – usually good for 90 to 120 days – so you’re house-shopping with a plan and a budget. Doing this work ahead of time will make you a confident and informed home-buyer. You’ll know exactly how much house you can afford – before you ever start dreaming of home!
GETTING THAT DOWN-PAYMENT: It might be easier than you think!
For many first-time home-buyers, that down-payment is one of the big obstacles to home ownership. Saving up cash – especially if you’re paying rent, paying down student loans, and trying to live a life – can be slow and difficult work.
In most cases, you’ll need to save up at least 5% of the purchase price of your home. But there are some programs and tips we can offer to give your down-payment a boost – to get you into your home faster:
1. Home Buyers' Plan (HBP) lets first-time home-buyers withdraw up to $25,000 each (or $50,000 for a couple) tax-free from their RRSPs. You’ll need to pay those funds back, of course, on a repayment plan.
2. A financial gift from a parent or blood relative can be used as a down-payment. This can not be a private debt; you’ll need to document in writing that the funds are a gift and you are not required to pay the money back at any time.
3. Start small. If your dream home is out of reach, look for a starter home. Use today’s low interest rates to start hammering down your first mortgage, then watch for the opportunity to get the home of your dreams – using the equity and credit rating you’ve been building!
Talk to us today – to ensure that you get off on the right foot in your home buying journey!
BEYOND RATE: Get expert advice
There’s a tendency to go rate shopping when you’re looking for a mortgage. After all, a great rate can save you thousands and help you better manage your debt. And that’s one reason so many first-time homebuyers are working with independent mortgage brokers. Most brokers have access to a wide range of established lenders – up to 50 – including major banks. They can compare rates across the board and show you where the best bargains are for your situation.
But the real value of a mortgage broker goes beyond rate. A mortgage broker provides invaluable education on mortgage preparedness. A first-time home-buyer should see a mortgage professional early – for tips to boost your credit rating (so you qualify for the best rates), and for advice on downpayment options. Your mortgage broker can sort through all of the mortgage options and get the right combination of features, privileges and rate that is best matched to your needs. It’s so important to consider term, prepayment options, refinancing penalties, restrictions, and fees because the right choices can save you thousands.
Dreaming of home? Come see us. We’ll get you started!
CREATE AN EMERGENCY FUND: Someday, something will go wrong.
Somewhere in that first-time home-buyer’s budget you need a line item that says “Emergency Fund”. You may think that you don’t need it; if something happens, you could take out a Line of Credit, right?
Every homeowner should have an Emergency Fund set aside. That’s because someday, something will go wrong. Imagine the roof suddenly starts to leak. Or you discover mould in the basement. Or maybe you get hurt and need to take a month or two off work. What happens to your carefully designed budget then?
Having an emergency fund in place before you buy a home will give you peace of mind – knowing you have some financial buffer to tackle an unexpected financial obstacle.
So what about that Homeowner Line of Credit? Well your mortgage broker can provide some guidance; it’s often a good idea to have a low-interest financial safeguard – before you need it. Just keep in mind that it is also borrowed money. If you use your Line, you’ll need to budget carefully to pay it back.